EA sees revenue boost as increase demand in video games

Videogame sales in the United States have surged in the last two months as the virus shut down the country

Reuters May 06, 2020
Boy opened a Paytm account from his father's phone and linked it to his bank account for downloading online games. REPRESENTATIVE IMAGE

Video game publisher Electronic Arts forecast full-year adjusted revenue above Wall Street estimates on Tuesday, riding on the broader surge in videogame sales as people shelter at home due to the Covid-19 pandemic.

Videogame sales in the United States have surged in the last two months as the virus shut down the country and forced millions inside their homes, with sales in March hitting their highest in over a decade.

Analysts expect the extended stay-at-home orders to further boost sales and user engagement for videogames across all platforms.

However, EA’s shares were down about 5% in extended trading.

“I think investors thought that shelter-in-place would trigger even more growth than they guided to,” said Michael Pachter, Wedbush analyst.

“Expectations were too high, and the company is probably being a wee bit conservative.”

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EA, like rivals Activision Blizzard and Take-Two Interactive Software, has a history of guiding conservatively at the beginning of the year.

Revenue from live services in the quarter was $832 million, up about 17% from a year ago, the company said.

EA earns a bigger chunk of its sales from its live services which include in-game purchases and “EA Access”, a subscription-based online service, among other items.

“With more people staying at home, we have experienced, and are continuing to experience, heightened levels of engagement and live services net bookings growth to date”, EA said in a statement.

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EA’s popular titles, including its holiday launch “Star Wars Jedi: Fallen Order” that has over 10 million players to date, competes with other big-budget titles from rivals Activision Blizzard and Take-Two Interactive.

The company forecast full-year adjusted revenue of $5.55 billion, beating analysts’ average estimate of $5.37 billion.

On an adjusted basis, the company’s quarterly revenue fell to $1.21 billion from $1.36 billion, but edged past analysts’ estimates of $1.19 billion, according to IBES data from Refinitiv.

“The year-on-year decrease is driven by the massive launch of Apex Legends a year ago”, Blake Jorgensen, chief financial officer, said on a post-earnings call with analysts.

Net income jumped to $418 million, or $1.43 per share, in the fourth quarter ended March 31, from $209 million, or 69 cents per share, a year ago.

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